CRA indicates that a GRE likely cannot be continued indefinitely as a QDT

An estate that qualified as a graduated rate estate (GRE) was not able to convert some of the estate property into cash until late in the third year after the death of the deceased. During the 36 month GRE period, the residuary estate beneficiary becomes disabled. Can the estate continue indefinitely and elect to be treated as a qualified disability trust each year such that graduated tax rates will continue to apply?

CRA indicated, likely “no” since once the estate administration was completed (or should have been completed), there would be no estate income (as the beneficial ownership of its property had passed to the residuary beneficiary) – or if the estate somehow were viewed as still earning income, such income would be payable to the beneficiary and, therefore, be income of the beneficiary under ss. 101(24) and 104(13) rather than of the estate.

Neal Armstrong. Summary of 7 June 2019 STEP CRA Roundtable, Q.11 under s. 122(3) – qualified disability trust – s. (a)(i).